Those office perks have value, too.

By Lauren Phillips
February 16, 2021
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When someone asks you how much you make at your job—imagine for a moment that that's a common, socially acceptable question—your response probably jumps straight to a number: your salary. In conversations about career paths and industries, we often talk about jobs in terms of what's high-paid and what's not, but there's so much more to what you earn for doing a job than just your salary (and we're not talking about the intangible, soul-enriching rewards of doing meaningful work).

Instead of just thinking about salary, think about your total compensation: the combined value of your salary, any bonuses you might get, a 401(k) match, free office coffee, and more. All those freebies or conveniences that feel like work perks—including your PTO—are actually parts of your total compensation package, and they can have just as much value as your salary.

"I don't know why everyone lands solely on salary," says Rob King, CLTC, a financial advisor with Northwestern Mutual. "I feel like in the world of 2020 and beyond, that will change."

Your total compensation consists of the entire employee experience and goes way beyond base salary and incentives, says Dena Faccio, SVP of compensation, benefits, HR resolution team, and workforce analytics at Voya Financial, a financial services company. At Voya, Faccio says, total compensation is direct compensation (including base salary, annual cash incentives, and equity-based long-term incentives), company-sponsored benefits like a pension and 401(k) plans and health insurance, and work-life balance benefits including paid time off, back-up child care, paid parental leave, and tuition reimbursement. It's so much more than salary, but salary gets the most attention.

"It's the least complex of the elements of compensation—it's paid in cash and on a regular basis (e.g., weekly or bi-monthly), making it easiest to understand and manage," Faccio says.

In your understanding of what you make at work—your compensation—base salary plays an important role, but it's not the end-all, be-all of a good job. If you're searching for a new job or about to enter negotiations with your boss or current company for a promotion or raise, knowing what your total compensation is now can help you negotiate.

"Understanding the value and components of your company's total rewards offering gives you a benchmark for comparison to what other companies may offer," Faccio says. "Employees who place a higher personal value on paid time off or health care benefits, for instance, will want to ensure that a prospective employer can at least match those offered by your current employer."

In other words, the raise that comes with a new job might feel nice, but if it comes with fewer vacation days, you may end up regretting your decision to switch companies. Depending on your priorities, you might choose a job with more paid time off or more flexibility, even if it pays a little less, in order to spend more time with your family.

Essentially, knowing your total compensation helps you consider your options elsewhere, says Brittney Castro, CFP, an advisor with personal finance app Mint. "For example, maybe the company is offering you a lower salary but you receive stock options and those vest after a certain amount of years working for the company," Castro says. "Then you can review and see if it makes sense to stay with that company those years to fully vest in the stock options. On the other hand, if you plan to switch jobs before they vest, they're essentially worthless to you. By reviewing your options, you will better know what you want and what matches your wants in order to better negotiate for yourself."

To know what your current compensation is, though, you'll need to do a little math.

How to calculate your total compensation

Basically, you want to add the value of everything you receive from your employer together. To calculate your total compensation, start with your salary (that's likely the largest number in your total compensation, after all) and add the value of your employer-provided health insurance. (If you don't know how much of your insurance your employer pays for, your company likely has a benefits portal where you can check, or you can contact HR.) Add the value of your 401(k) match.

It gets a little trickier after that: To get the most accurate number, you'll want to include the value of every free meal or reimbursement program your company provides. If you get free coffee or lunch at work (and take advantage of those benefits), calculate the average value of each item, multiply it by the number you consume each year, and add it to your total compensation. (Every coffee you get at work to replace a $5 coffeeshop coffee saves you $5, after all.) Include the value of any pre-tax savings programs your employer offers, too, such as commuter or parking benefits. If your company offers gym reimbursements or charitable contribution matching, add the value of those, too. Also calculate the value of your paid time off.

At the end of your calculations, you should have a numerical value that represents how much everything you get at work is worth. You'll also have a list of all the benefits or perks you get—and if you're not taking advantage of all of them, hopefully you'll have a reminder to do so.

When you know the value of your total compensation, you can make more informed decisions about your job and what you want for the future. And even if you're not on the job hunt, you'll know what benefits you have so you can make sure you're taking advantage of them and track how your total compensation shifts over time. Like net worth, you want it to move in an upward direction over time, even if that growth isn't specifically in salary. If your salary stays the same for a few years but you get an extra week of vacation, your total compensation is still increasing, just in a more subtle way.